Vietnam - Who are the biggest debtors?

VietNamNet Bridge - The names of the biggest debtors have not been revealed. However, an official of the National Finance Supervision Council has affirmed that most of the bad debts are being incurred by two subjects – state owned enterprises and private “big guys.”

In a report released recently by the State Bank’s Inspection Agency, the bad debt (irrecoverable debt) ratio may reach 8.6 percent, or about 200 trillion dong.

According to Thoi bao Kinh te Vietnam, by March 31, 2012, state owned banks’ bad debt ratio had reached 50.5 percent. Meanwhile, the ratios were 27.8 percent for joint stock banks, 4.2 percent for foreign banks and 17.5 percent for other credit institutions.

However, the names of the biggest debtors, which have created the “blood clots” causing the “traffic jam” in the national economy remain unknowns. On the TV program “People ask – Ministers answer” broadcasted in early July, Minister of Planning and Investment Bui Quang Vinh cited the figures from the Ministry of Finance as saying that state owned enterprises had incurred the debt of 1,008,000 billion dong, while their stockholder equity is 790,000 dong.

On average, the ratio of debt on stockholder equity of state owned enterprises is 1.36. However, of the state owned enterprises, 30 enterprises have the debts three times higher than the stockholder equity.

The Truong Son Construction Corporation, for example, has the debt higher by 9.19 times than the stockholder equity. The figures were 4.79 for Licogi, a construction and infrastructure development corporation, 4 for HUD, 3.83 for the Electricity of Vietnam EVN and 3.12 for Vinalines, a shipping firm.

The figures account for nearly 50 percent of the total outstanding loans provided by the whole banking system (2.5 million of billions of dong).

There has been no official report about the actual debts incurred by state owned enterprises. Dang Van Thanh, Deputy Chair of the Vietnam Accountants’ Association, also said that the debts incurred by state owned enterprises are very complicated and it’s very difficult to reckon up the debts.

However, the bad debts are believed to increase in 2012, when enterprises face bigger difficulties which make them exhausted.

Analysts have warned that a lot of debts, in debt classification, would be transferred into other groups of debts with higher risks. Meanwhile, according to Cao Sy Kiem, former Governor of the State Bank, up to 70 percent of the banks’ bad debts are being incurred by state owned enterprises, while the debt incurred by private businessmen just amounts to a small proportion.

The second biggest debtor, according to the official of the National Finance Supervision Council, is the well-known big guys, including the ones whose names appeared in the list of the top stock millionaires.

“The big guys mostly borrowed money to develop real estate projects, The loans could be hundreds of billions of dong or tens of trillions of dong. However, since the real estate market has got frozen, the capital has also been buried under the buildings, and the big guys cannot take back the investment capital to pay bank debts,” the official said.

“I know a big guy, who borrowed the huge sum of 4 trillion dong to develop a high rise building in HCM City. However, since there has been no leasers, he does not have money to pay debts,” he added.

Meanwhile, Kiem has attributed the big bad debt ratio of state owned enterprises to the banks’ carelessness in inspecting the feasibility of the enterprises’ projects. Commercial banks all believe that state owned enterprises are backed by the state and they would be able to pay debts. Therefore, the banks skipped a lot of necessary examination steps, lending to the enterprises with easy conditions.

Kim Chi

Business & Investment Opportunities 
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com